Good taxpayer experience

The Ministry of Finance introduced the concept of LTU (Large Tax Payer Units) in tax administration during 2006. LTU was intended to be a single-window interface for all the centrally administered taxes — Income tax, Excise and Service Tax.

The LTU system is already prevalent in various parts of the world, including developed economies such as the US, the UK, and some Asian countries (including Sri Lanka, Pakistan, Nepal, Bangladesh) and functioning well. In India, LTUs have been operationalised at Bangalore, Mumbai, Delhi and Chennai.

Every taxpayer paying excise duty or service tax of Rs 5 crore or more or income tax of Rs 10 crore or more in a financial year will be termed large tax payer.

Besides aiming to bring about uniformity in determining taxes and duties and reducing compliance costs and delays, the Government, at the time of setting up of LTUs, had promised many facilities. These included: Centralisation of statutory compliance at one location; Payment of taxes, sanction of refunds, filing of returns through electronic mode; Appointment of a senior-level officer as a client executive for interaction with the nominated resource person at the assessee’s end for resolution of disputes; No mandatory audit, transfer of Cenvat credit between units; and Provision of state-of-the-art facilities with good infrastructure, ambience and best management practices.

Except for the above, LTU assessees do not enjoy a special status or special fiscal concessions. Whatever is applicable to a non-LTU assessee, will, mutatis mutandis, be applicable to LTU assessees as well.

The bottom line is that the relationship established is purely on “Trust but verify” basis, which makes life slightly easier for a LTU assessee as against non-LTU assessees.

Scoring on many fronts

The LTU concept is five years old. So has it achieved its objectives? The answer is a yes. Overall, the LTU scheme has considerably achieved its objectives in:

Reaching out to all the Large Tax Payers by rendering timely and quality services

Achieving excellence in the implementation of tax initiatives

Ensuring greater voluntary compliance built on mutual trust and synergy

Automating the business process to deliver quick and prompt solutions.

A team of knowledgeable officers, ease of access to them, high level of automation and periodic interactive meetings have made LTU’s vision achievable.

In the excise area, facility to transfer Cenvat credit between different units of a manufacturer is an important benefit from the point of view of working capital management and helps avoidance of credit accumulation.

The LTU system offers an e-environment in tax administration and is also a positive step towards e-governance envisaged by the Government. On the Income Tax side, refunds are faster. Timely implementation of the orders of the appellate authorities is ensured when it comes to LTUs.

But there are unresolved concerns to this system too.

Litigation has come down under the LTU scheme. But time constraints, coupled with audit queries, do sometimes lead to litigation and settled issues getting unsettled.

People resources seem to be a constraint and there is an absolute necessity to strengthen manpower at all levels of tax administration, including appellate functions.

Industry wish list

The industry has its wish list. Specifically, it wants coverage of customs taxation, grant of rebates/duty drawbacks, TDS activities and transfer pricing under LTU. In addition, centralised excise duty and service tax payments and credit availment may help.

LTU is a milestone in tax administration in India. Most of the State Governments have started LTUs. Apprehensions in the industry exist about existence of LTU post the Direct Taxes Code and Goods and Service Tax. One hopes it will continue.

The good taxpayer experience with LTU is probably why, though an assessee can opt out of the scheme any time, those who have joined LTU have not opted to move out.

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